Current Mortgage Rates for April 2021

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Are mortgage rates going up or down?

Mortgage interest rates can fluctuate daily — even hourly — and are influenced by the bond market and trends in the housing market. Economic factors — such as inflation, unemployment or Federal Reserve monetary policy changes — can also influence rates, though indirectly. 

There is no federal mortgage rate, and mortgage rates don’t automatically change when the Fed cuts or increases the federal funds rate. Mortgage rate predictions can shift if economic data changes or something unexpected happens, such as an international trade war, for example.

What are the mortgage rate trends in 2021?

Mortgage rates are predicted to average near 3% in 2021, according to the housing market forecast from Tendayi Kapfidze, LendingTree’s chief economist.

Where can I find personalized mortgage rates?

You can get personalized rates by using a rate comparison tool and sharing some basic information about yourself. You can also apply for a mortgage with at least three lenders to see what rates you qualify for based on your creditworthiness and financial profile.

A mortgage is a loan from a bank or another lending institution that helps you buy a home. The lender provides funds on your behalf for your home purchase, and you agree to repay the loan plus interest. If you stop making monthly payments, your lender can repossess your home through the foreclosure process and sell it to recover their money.

There are several factors that determine your mortgage rate, including your: 

 

      • Credit score 
      • Down payment amount 
      • Loan amount 
      • Loan program 
      • Loan term 
      • Location

Economic factors, such as inflation and U.S. Treasury bond yields, can also influence mortgage rates to move up or down.

One of the main ways to get your best mortgage rate is to improve your credit score before applying for a mortgage. Aim for a minimum 740 credit score, which may help you qualify for the lowest rates.

 

A lower debt-to-income (DTI) ratio can also lead to a lower rate. Your DTI ratio is the percentage of your gross monthly income used to repay debt. Lenders like to see a maximum DTI ratio of 43%, according to the Consumer Financial Protection Bureau.

 

A larger down payment and shopping around with multiple lenders are other ways to get your best rate.

The Federal Reserve’s monetary policy directly affects adjustable-rate mortgages, as they are tied to an index that moves up and down with the broader economy. The Fed’s policy indirectly impacts fixed-rate mortgages, which typically correlate with the 10-year U.S. Treasury bond yield.

You can compare mortgage rates by shopping around with multiple mortgage lenders. A good rule of thumb is to pick three to five lenders and gather quotes from each one. Pay attention to the quoted mortgage rates, as well as the various lender fees and closing costs.

There are five main types of mortgages

 

      • Conventional loans. These loans often require a minimum 620 credit score and 3% down payment. Borrowers who put down less than 20% must pay for private mortgage insurance. 
      • FHA loans. You may qualify for an FHA loan, which is backed by the Federal Housing Administration (FHA), with as low as a 500 credit score and 10% down payment. You’d only need to put down 3.5% if you have a 580 score or higher.  
      • VA loans. The U.S. Department of Veterans Affairs (VA) backs VA loans, which are exclusive to military service members, veterans and eligible surviving spouses. Many lenders prefer a 620 credit score and there’s often no down payment required. 
      • USDA loans. These loans are insured by the U.S. Department of Agriculture (USDA) and cater to homebuyers in designated rural areas. You’re typically not required to make a down payment, but you will need to meet income requirements. In many cases, you’ll need a minimum 640 credit score.
      • Non-conforming loans. Also known as “jumbo loans,” non-conforming loans have amounts that exceed conforming loan limits set by Fannie Mae and Freddie Mac’s lending guidelines; these loans usually require a minimum 680 to 700 credit score and 20% down payment. Fannie and Freddie are government-sponsored entities that buy and sell mortgages from private lenders.

A mortgage annual percentage rate (APR) represents the total cost of borrowing a mortgage (interest rate plus closing costs and fees), and is expressed as a percentage. A mortgage interest rate — which is also expressed as a percentage — is the base rate you’re charged to borrow your loan.

You should choose a mortgage lender that best suits your financial needs, which is why it’s crucial to shop around. Make sure the lenders you’re choosing from offer the mortgage program you’re interested in, and ask questions to better understand what to expect from your potential relationship with each lender. 

 

As mentioned above, compare interest rates and closing costs before making a decision.

Once you’ve selected your lender and are moving through the mortgage application process, you and your loan officer can discuss your mortgage rate lock options. Rate locks can last between 30 and 60 days, or even more — if your loan doesn’t close before your rate lock expires, expect to pay a rate lock extension fee.

You’ll need to apply for mortgage preapproval to get an estimated loan amount you could qualify for. Lenders use the preapproval process to review your overall financial picture — including your assets, credit history, debt and income — to calculate how much they’d be willing to lend you for a mortgage. 

 

You can use the loan amount printed on your preapproval letter as a guide for your house hunting journey. But, be careful not to stretch your budget too thin and borrow to the maximum — your preapproval amount doesn’t factor in recurring bills that aren’t regularly reported to the credit bureaus, such as gas, cellphones and other utilities, so you’ll need to retain enough disposable income to comfortably cover these monthly bills, plus your new mortgage payment.

A discount point — also called a mortgage point — is an upfront fee paid at closing to reduce your mortgage rate. One point is equal to 1% of your loan amount. So if you’re borrowing $300,000 for example, one point would cost you $3,000. 

 

Each mortgage point can lower your rate 12.5 to 25 basis points, which equals 0.125% to 0.25%.

It’s possible to negotiate a lower interest rate. Use your mortgage offers as leverage and ask each lender about matching your lowest-quoted rate. You should also consider making a larger down payment and paying for mortgage points.

Which mortgage loan type is best?

A 30-year fixed-rate mortgage is the most popular type of mortgage because of its affordability and stability. Meanwhile, the 15-year fixed-rate mortgage typically comes with a lower interest rate when compared with a 30-year loan. The trade-off with a 15-year term is a significantly higher monthly payment, however, because your repayment term is cut in half.

The 5/1 adjustable-rate mortgage (ARM) can be similar to the 30-year fixed-rate mortgage in that it can also have a 30-year repayment term, but there are terms available. What sets 5/1 ARMs apart is that the interest rate is only fixed for the first five years of the term, and then the rate is recalculated annually for the remaining 25 years.

 

Mortgage rates on 5/1 ARMs are often lower than rates on 30-year fixed loans. When the rate starts adjusting after the fixed period ends, it could go up or down. If your rate increases, you’ll need to be financially prepared to either absorb a higher monthly payment amount or refinance into a fixed-rate mortgage.

A 10/1 adjustable-rate mortgage has a longer, initial fixed-rate period than a 5/1 ARM. You’d enjoy a stable interest rate for the first 10 years and have a fluctuating rate for the remaining 20 years. An 10/1 ARM might work best for you if you plan to sell your home or apply and qualify for a refinance before the fixed-rate period ends.